Shore Capital downgrades Devro

The cost of developing new product lines means shares in sausage-skin maker Devro (DVO.L) will struggle to make gains in the near term, according to Shore Capital analyst Darren Shirley, who has downgraded the group from 'buy' to 'hold'.

A final dividend of 5.85p has been proposed, resulting in a total payment for the year of 8.5p, a 6.3% increase year-on-year.

'We believe much interest will focus on the 80 basis point decline in the earnings before interest and taxes margin to 17.9% (18.2% in constant currency), as the group was adversely impacted by rising hide and energy costs through the middle of the year, and also the continuing phased investment and introduction of new manufacturing lines,' Shirley warned.

'With forecasts again under pressure we see limited scope for stock appreciation in the short term and down grade our recommendation.'

Shares in the group closed at 359p on Tuesday, up 4p or 1%.

Key stats

Market capitalisation

£9,487m

No. of shares out

817m

No. of shares floating

797m

No. of common shareholders

not stated

No. of employees

41521

Trading volume (10 day avg.)

3m

Turnover

£5,059m

Profit before tax

£283m

Earnings per share

35.13p

Cashflow per share

74.85p

Cash per share

130.72p

*Correct as at 26 Feb 2013

Restructuring holds key for Pearson's future, Berenberg Bank says

Publishing group Pearson (PSON.L)'s £150 million restructuring effort holds the seeds of long-term growth, according to Berenberg Bank analyst Sarah Simon, who has a 'hold' recommendation on the shares.

The news that Pearson is to ramp up its restructuring plan came alongside Monday's warnings over difficult advertising markets and lower government spending. Fears that these will hit the publishing and schools businesses saw the shares drop 5.6%.

However, Simon is backing the group. 'While these restructuring costs took the market unawares, ultimately we believe that Pearson is a business with solid structural growth in its long-term future,' she said. 'This is not the case for many of its peers, which are seeing rising pressure on organic growth.'

Shares in the group closed at £11.53 on Tuesday, down 18p or 1.5%.

Key stats

Market capitalisation

£37,568m

No. of shares out

70,424m

No. of shares floating

42,555m

No. of common shareholders

not stated

No. of employees

120449

Trading volume (10 day avg.)

107m

Turnover

£26,316m

Profit before tax

£-2,787m

Earnings per share

-4.07p

Cashflow per share

-0.90p

Cash per share

88.25p

*Correct as at 26 Feb 2013

Societe Generale drops Lloyds from 'Premium List'

Societe Generale analyst Paul Jackson has dropped Lloyds (LLOY.L) from his 'Premium List' of preferred stocks following a strong run for the shares.

The shares are now up more than 50% compared with six months ago, and almost 20% compared with three months ago.

On the prospects for the eurozone, The analyst sounded a hopeful note. 'We remain relatively optimistic on the medium-term prospects for European equities despite the risk of a market correction,' he said. 'The short-term undertainties motivate our effort to mix growth, value and financials within our selection of the best ideas.'

With Lloyds having hit Jackson's target price he has opted to retire it from the list. He has also dropped Swiss Re following Thursday's confirmation of its special dividend payment.

Shares in the group closed at 53p on Tuesday, down 1.7p or 3%.

Key stats

Market capitalisation

£941m

No. of shares out

303m

No. of shares floating

293m

No. of common shareholders

not stated

No. of employees

754

Trading volume (10 day avg.)

0m

Turnover

£306m

Profit before tax

£72m

Earnings per share

23.50p

Cashflow per share

24.51p

Cash per share

167.61p

*Correct as at 26 Feb 2013

Paragon stands to gain from buy-to-let revival

Bank of America Merrill Lynch analyst Michael Helsby has upgraded mortgage and consumer finance business The Paragon Group of Companies (PARA.L) from 'hold' to 'buy', arguing that changes in the buy-to-let market will propel the company.

'We think the basis is changing for Paragon,' Helsby said. 'Paragon’s new business options within the buy-to-let market are increasing dramatically. We would expect this to feed through into more competitive pricing and into volume growth.

'With the prospect of a banking licence now likely in 2013 we think it is likely that Paragon can restart its organic consumer finance growth.' Helsby has a target price for Paragon of 385p.

Shares in the group closed at 310p on Tuesday, up 0.8p or 0.3%.

Key stats

Market capitalisation

£871m

No. of shares out

134m

No. of shares floating

133m

No. of common shareholders

not stated

No. of employees

560

Trading volume (10 day avg.)

0m

Turnover

£365m

Profit before tax

£23m

Earnings per share

17.50p

Cashflow per share

18.06p

Cash per share

42.03p

*Correct as at 26 Feb 2013

Citi downgrades Bovis after strong run

It's time to pause for breath on Bovis Homes Group (BVS.L) following a strong run for the shares, according to Citi Research analyst Aynsley Lammin.

The shares have gained over 42% since July 2012, Lammin noted, with improving margins and volumes cheering the mood. Preliminary results a couple of weeks ago showed pre-tax profits of £54 million, £1 million ahead of the analyst's projection.

'However, given the recent run in the share price which is now closer to our price target of 710p (unchanged) and a valuation of 1.1 times price to net asset value we would not be surprised to see the shares pause in the near term,' Lammin said.